Page 5 - LatAmOil Week 20 2022

LatAmOil COMMENTARY LatAmOil

Meanwhile, Shell cast a wider net and sought to equipment, fabrication and site preparation are
challenge Sempra in court. well underway,” he stated during an earnings
More specifically, it filed two suits in Mexico’s call. “The project is on time and on budget, and
constitutional court in 2020, seeking on the one we continue to expect first LNG production by
hand to overturn CRE’s approval of the updated the end of 2024.
ECA terms and conditions and on the other
hand to rescind the issuance of IEnova’s gas liq- Total turnaround
uefaction permit. Assuming that the company meets this deadline,
it will be in the impressive position of having
Legal defeats converted ECA from a gas import facility into
These efforts have not been successful. Mexico’s a gas export facility within the space of 15 years.
constitutional court denied its request to stay ECA was initially built for the purpose of
approval of the update to the terms and con- establishing a new means of delivering gas to
ditions in October 2020 and then upheld that North America, on the assumption that the US
rejection upon appeal. The same court then and Mexico would need imports from far-flung
rejected its call for rescinding the liquefaction sources.
permit in March 2021 and once again upheld Shortly after it came on stream, though, Sempra managers
this ruling upon appeal. hydraulic fracturing (fracking) techniques
The case then came to the ICC arbitration took the US oil industry by storm, opening up remain confident
court for hearing in October 2021, and accord- unconventional reserves that had hitherto been
ing to Global Arbitration Review, this round of inaccessible. As a result, US domestic gas pro- that Asia is a
debate has also ended in IEnova’s favour. The duction soared, and the US quickly became a
ICC has yet to issue an official statement on the net gas exporter – and this, in turn, meant that long-term growth
matter, and the companies involved have said the case for IEnova’s ECA regasification terminal market for LNG
almost nothing publicly. became much less compelling.
Even so, assuming that the report is cor- Nevertheless, the Sempra subsidiary retooled made with US gas
rect, Shell and Gazprom’s latest defeat in court its plans and opted to transform the facility into
is important. After all, Sempra did describe the an LNG export terminal capable of receiving
lawsuit in an extended report on its performance US-produced gas from the Permian basin in
in the third quarter of 2021 as a threat to the suc- Texas and liquefying it for delivery to foreign
cess of the ECA project, saying: “One or more markets.
unfavourable final decisions on these disputes or It also drew up a strong new business case for
challenges could materially adversely affect our the project, noting that ECA’s location on Mex-
existing natural gas regasification operations ico’s west coast would allow for relatively faster
and proposed natural gas liquefaction projects sailing to Asia, where demand for gas is strong,
at the site of the ECA Regas Facility and have without the need to pass through the Panama
a material adverse effect on Sempra’s business, Canal, as cargoes from the US Gulf Coast
cash flows, financial condition, results of opera- (USGC) region must do.
tions and/or prospects.” Sempra managers remain confident that Asia
Thus far, the lawsuit has not stopped Sempra is a long-term growth market for LNG made
or its Mexican unit from starting work on the with US gas, despite the recent upswing in Euro-
ECA project. In fact, last November, Justin Bird, pean demand that has followed the outbreak of
the CEO of the US company’s Sempra Infra- war in Ukraine. As such, reports that the ICC
structure subsidiary, said that work on the ECA arbitration court has ruled in IEnova’s favour,
Phase 1 project was moving forward. thereby removing one more obstacle to the ECA
“At ECA LNG Phase 1, engineering, project, is good news for the company. ™

Shell and Gazprom had arranged to deliver LNG to ECA in 2009 (Photo: ECA)

Week 20 19•May•2022 www. NEWSBASE .com P5